Nov 19, 2004

TOKYO (Reuters) - Bloated with inventory and mired in the red, the digital camera business of Japan's Olympus Corp. underscores how making money in the cut-throat market is getting tougher.

Sony Corp. and Canon Inc. are seen as the strongest players in the $17 billion market, profiting even as prices fall and growth slows. But most other makers will struggle and some might be better off exiting, analysts said.

"They seem to think it's a big game of chicken and if the other guy backs down they will be able to make lots of money," said KBC Securities analyst James Moon. "Someone has got to realise that you can't make money on these things anymore."

The average price of a compact digital camera will decline by 15 percent in 2004 and another 15 percent next year, according to UBS analyst Ryohei Takahashi.